Fully cladding your Particulars of Claim is key

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Beware the pitfalls of bringing a claim at the last possible opportunity, and the prohibition against pleading new causes of action in the Reply to Defence … Martlett Homes Limited v. Mulalley & Co. Limited [2021] EWHC 296 (TCC).

Background

The Claimant (Martlett) owns five high rise tower blocks in Hampshire (the “Properties”). On 20 January 2005, the previous owners of the Properties contracted with the Defendant (Mulalley) to undertake various refurbishment works. Those works included the design and installation of external cladding and which were carried out between 05 December 2006 and 07 April 2008 (the “Works”).

The Claim

Martlett issued proceedings on 11 December 2019 and served them on 09 April 2020, the very last possible day for service. The allegations against the Mulalley concerned various defects in the Works including (i) defects in the fire barriers in the Properties’ cladding (ii) a failure to fix properly the combustible expanded polystyrene (“EPS”) insulation boards to the external walls of the Properties; and (iii) a failure to repair properly the Properties’ existing structure. Damages sought were circa £8m including the cost of remedial works, and the cost of having the Properties constantly patrolled in case of a fire.

Mulalley denied that the alleged breaches had caused loss. They argued that Martlett, as the building owner, would have been required to arrange the replacement of the EPS cladding fitted to the Properties in any event. Following the tragic fire at Grenfell tower in June 2017, it was no longer permitted to use such cladding on buildings over 18 metres in height and thus the remedy for any breach lay with Martlett itself.

In an attempt to address this, and rather than seeking to amend its Particulars of Claim, Martlett pleaded in its Reply that even if Mulalley was right on causation, it would remain liable as it was in breach of contract by using [our underlining] combustible insulation in the cladding (the “Alternative Case”).

The Application to strike out

Mulalley subsequently applied to strike out the claim on the basis that Martlett was not permitted to raise a new claim in its Reply, specifically asserting that the Alternative Case was not responsive to the Defence, but rather sought to set up a new claim.

In response, Martlett sought permission to amend its Particulars of Claim.

Decision

The Judge found that the criteria set out in CPR 16 relating to precisely what content  should be  pleaded within a Statement of Claim was unequivocal and that “any” ground of claim must be pleaded [our underlining] from the outset and not in a Reply to the Defence.

In considering whether Martlett could amend its Claim after the expiry of limitation, the judge followed the four stage test set out in Hyde v. Nygate [2019] EWHC 1516 (Ch.). Whilst Martlett sought to bring a new cause of action outside of the limitation period, it arose from substantially the same facts as those set out in the Defence and that factor allowed the Court to exercise its discretion when considering the amendment.

In the event, the Court did exercise its discretion concluding that the real issue was in fact limitation. This was because if the amendment was refused, Martlett would lose the opportunity to hold Mulalley to account for its “choice” of a combustible cladding system. Furthermore, the parties should be allowed to rely on any new cause of action, which arose from substantially the same existing facts, particularly if those factual issues were to be litigated between the parties in any event. [Our underlining]

Consequently, the applicable parts of the Reply to Defence were struck out, and Martlett was granted permission to amend its Particulars of Claim.

Analysis

It remains the case that it is inherently undesirable to allow parties to advance a new claim in a Reply.  In such circumstances, claimants would not need to be precise in the formulation of their Particulars, as they would always have a second chance to get it right when responding to the Defence.

Indeed the Court marked its astonishment in this case that, having had the issue highlighted at a previous adjudication in 2019, Martlett did not elect to plead the Alternative Case from the outset. On another occasion, the Court might have reached an alternative view. 

There is no doubt that it is critical for a claimant to prepare its case properly at the outset as there are foreseeable difficulties in attempting to amend a case at a later stage. One might say that Martlett was lucky on this occasion, particularly when attempting to amend its case after the expiry of limitation.

This is a another decision in what is a growing number of litigated claims relating to defective or combustible cladding (for a further example, see our article about RG Securities.

Defendants in similar circumstances may want to track the outcome of this case because if it ever comes to trial it will be interesting to see how Mulalley’s argument pans out. That argument being whether replacement of the cladding was necessary in any event pursuant to the Regulatory Reform (Fire Safety) Order 2005, thereby removing the causal link to liability.

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